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ITEM CG16 Supplement

EXECUTIVE – 16 JUNE 2004

FINANCIAL MONITORING

Report by the Leader of the Council and the Deputy Leader of the Council

Introduction

  1. The report by the Head of Finance which follows is the first for the new financial year 2004/05 and the first to provide a monthly update on capital as well as revenue. We are determined that this Council has a robust regime for monitoring capital and revenue expenditure both to provide assurance that public money is being spent effectively and efficiently and to provide essential management information to members and officers of the Council.

  2. There is a need to strengthen systems and enhance accountability across the Council and this new reporting mechanism is a part of that process. To be successful, there needs to be a commitment from all in the organisation to strengthen the culture of accountability and to recognise this is not restricted to elected members and senior management; it needs to permeate all tiers of management.

  3. A number of mechanisms are in place to achieve this. They include the current review of financial systems; work on the SAP financial system; work on the capital programme by the Capital Programme and Asset Management Group and Raising our Performance 2 to mention only a few. The budget for 2004/05 includes significant funds designed to strengthen the finance function and it is key that these funds are deployed effectively. Management development programmes to strengthen performance management, project management and business process re-engineering are also vital.

    4. Revenue Monitoring

  4. The revenue position becomes ever more complex. This is a function of the high level of specific grant from government, the forest of regulations, targets and performance measures within local government increasingly has to work and the need to use finances imaginatively within the constraints of affordability and capping.

  5. The key themes to emerge from a reading of the Outturn 2003/04 report and of the first Revenue Monitoring Report for 2004/05 are set out below.

    6. Learning & Culture

  6. There are significant over spends on Out-of-County Placements and Statementing. On 16 March, the Executive considered a report on how the position would be addressed. Given the size of the overspend, the Executive needs to see a robust Action Plan with accountabilities and deadlines to give them the confidence that this will be dealt with.

  7. During 2003/04, on the basis of information from schools, school balances were predicted to be run down to zero or even to a negative position. An informal view was taken that this was overly cautious. Year-end returns now show the balances position to be very much stronger than any predictions. It is unacceptable for an organisation not to have regular and reliable data relating to the finances of what would be subsidiaries in a private sector group of companies. The SAP financial system now being developed for eventual use in schools must provide the capability for regular and accurate financial monitoring of school budgets both by school management and governors and by the County Council corporately. This is an urgent priority for this Executive.

    8. Social & Health Care

  8. The gross budget for 1999/2000 was £108 million; that for 2003/04 was £196 million. This represents an annual rate of growth in spending over four years of 16% per annum, although this includes additional resources for extra responsibilities including Supporting People (£21m). Despite this, eligibility criteria for access to care in some areas are high and pressures on the budget are unremitting.

  9. Government specific grant provides a significant source of income to Social & Health Care. Additional grant income occasionally arises in year and a mechanism is then required to agree how it is allocated to the base budget, taking account of:

(a) any rules attaching to the use of the specific grant;

(b) the County Council’s own priorities for investment;

    1. where the grant is time limited (the norm) what exit strategy is appropriate and possible.

  1. There are carry forwards from 2003/04 available to Social & Health Care for 2004/05 and it is necessary to agree how these should be allocated to meet emerging pressures, taking account both of 2004/05 and 20005/06. This information will be analysed and brought to the July 20 Executive for a decision.

    2. Environment & Economy

  2. There is an under-spend on waste management and the Executive needs to understand the underlying reason for this, to clarify whether it is one-off or ongoing and to review the business case for a "Better Working Investment " budget fund.

    3. Capital Monitoring

  3. This is the first monthly capital monitoring report and we welcome it as part of this Executive’s ongoing programme to tighten accountability. The capital programme for 2003/04 totals £111 million, financed through a mixture of borrowings, government grants, capital receipts and developer contributions. Ensuring value for money and clear accountability is an essential exercise for capital spending as it is for revenue.

  4. The report is evolutionary in format and comments from members on the level of detail and the general understandability of what is a very complex area would be welcome.

  5. Officers responsible for capital projects are now expected to provide a monthly statement of the anticipated outturn position on each project and significant expected variations will be reported to the Executive. The size of the capital programme is no reason for any relaxation in the search for value for money. While cost estimation is never going to be an exact science, the emergence of significant overspends has to be seen as a matter for concern to be reported promptly, together with reasons and details of corrective action taken.

Keith R Mitchell
Leader of the Council

Dermot Roaf
Deputy Leader of the Council

June 2004

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